Thorstein Veblen

The grabbing of natural resources

(1923)

 



Note

These are passages from Chapter VII of Absentee Ownership. Thorstein Veblen, as usual, goes straight tocore of the problem, i.e. to the grabbing and exploitation of natural resources for the gain of a relatively small clique of people at the expenses of the large population. In fact, according to the author, "without hindrance" represented by this hoarding of natural resources "the American population will always be assured an abundant and easy livelihood."

 


 

America is the most mature of these English-speaking colonies. And in all of these colonial nations the mainspring of the enterprise and the enduring preoccupation of the people has been the exploitation of natural resources for private gain. In all of them the natural resources have progressively been taken over into private ownership on a reasoned plan of legalized seizure. It has been a sober and orderly-advancing seizure of these resources, conducted under rules designed to safeguard a democratically equal opportunity of seizure, and advancing as fast as the available resources have successively become, or have promised to become, valuable. The rules governing this progressive subreption have been drawn on lines that constantly call to mind the rules governing games of skill, where a formally even chance is prescribed for all players who "sit in." And these rules of equitable "grab" have also, on the whole, been lived up to with about the same degree of scruple that is commonly to be had in games of luck and skill. In either case, wether in the standard games of chance and dexterity, or in the business of taking over natural resources and turning them to account, it is understood that any formally blameless evasion of the rules will rightly inure to the benefit of any competitor who so has been able to « beat the game. » It is a principle of self-help. But in either case, too, there is ·a formal limit on profitable evasion, beyond which tact and salesmanship cease to be sportsmanlike finesse or businesslike ambiguity and become sharp practice or swindle. [1]

So there has been incorporated in American common sense and has grown into American practice the presumption that all the natural resources of the country must of right be held in private ownership, by those persons who have been lucky enough or shrewd enough to take them over according to the rules in such cases made and provided, or by those who have acquired title from these original impropriators.

With the (partial) exception of the agricultural lands, the ownership of these natural resources is always absentee ownership, and it has always been absentee ownership that has been aimed at in the efforts made to come into possession of them. And they are always acquired and held with a view to getting a larger benefit from them than their cost; that is to say, with a view to getting a margin of something for nothing at the cost of the rest of the community. These are commonplaces, of course, which it should scarcely be necessary to call to mind.

The natural resources of America are, or have been, unexampled in abundance and availability, and they have always been the main factor on which the life and comfort of the inhabitants have depended. They are the indispensable means of life of the population at large, so that the livelihood of all the inhabitants from day to day is unavoidably bound up in their daily use. So long and so far as these resources can be turned to use without hindrance the American population will always be assured an abundant and easy livelihood. So much so that with free and full use of its unexampled natural resources and an unhindered employment of its workmanship this people may, or rather might, come in for an unexampled material abundance on unexampled easy terms. What stands in the way of this climax of material good fortune, immediately and directly, is the absentee ownership of these natural resources. And what stand in the way of discontinuing this absentee ownership of the country's resources is the moral sense of the American body of citizens; and in this they are in close accord with the working bias of their constituted authorities, whose chief care it is to safeguard and augment all rights of absentee ownership at all points.

Doubtless the discontinuance of absentee ownership in the country's resources would not of itself set the industrial system free to run at full capacity and so make the most of the country's workmanship; business considerations could not permit that, so long as business considerations continue to control the industrial system, - and there is other business to be taken care of than that which is occupied with the control of natural resources. But it remains true that absentee ownership of the countries resources stands first and obviously in the way of a continued full run of the country's productive industry.

Should it occur to anyone to take exception to this broad statement, it should suffice to call attention to the fact that the raw materials drawn from these natural resources command a price beyond the cost of the workmanship that goes to bring out the supply. Should this, again, be questioned, there is the fact that the absentee owners of the country’s coal, ore, oil, water-power, timber, quarries, water frontage, building sites, and the like, continue to hold these properties as a valued possession from which they derive a revenue. This is free income payable to the absentee owners of these things and constitutes an overhead charge on the country's productive industry; it goes into the cost of the goods produced, and is that much of a burden and restriction on the output. This should also be sufficiently obvious; but the moral sense of the body of citizens will tolerate no disallowance of this right of the absentee owners to get this legalised margin of something for nothing.

Natural resources are valuable to their owners not because the owners have produced these things nor because they have invested their "savings" in them, but because the community has use for them and is willing to pay something for their use, - because they are an indispensable means of living. Failing either the industrial usefulness which these things now have, or failing the continued willingness to allow the absentee owners a usufruct in these resources as a source of free income, they will no longer have value as assets, whatever they may have cost. [2] Natural resources are acquired, owned, and valued, as a source of free income; income for which no equivalent in useful work is given, whatever the cost at which these assets may have been acquired. At the same time they will be of no use, and so will have no value as assets, except as they are turned to use by the workmanship of the population. It is the state of the industrial arts that makes them natural resources, not the funds invested in their ownership. In the language of mathematics, the value of these things as a source of free income to their owners is a "function" of the workmanship of the population at large. And for the completeness of statement it should be added that the workmanship of the population is a "function" of the state of the industrial arts; which is a joint stock of technical knowledge and workmanlike habits ingrained in the population and carried on jointly by the country's man-power, which in this respect carries on as an indivisible going concern.

The absentee owner of natural resources is enabled to make them a source of free income, that is to say make them assets, by the power legally conferred on him to withhold them from use until his charge for their use is allowed him. What this charge will be is always question of what the traffic will bear; which is the same as what will yield him the largest net return. But what the traffic will bear will vary indefinitely according to circumstances of the case, and the value of given resources as assets will vary accordingly. [3] Aside from changes in the industrial arts, the most considerable and most widely effective of these varying circumstances is the varying degree in which competition prevails among the owners of such assets. [4]

In the usual course, in the case of such staple resources as coal, oil, or the ores, the business of exploitation has at the outset commonly been competitive in a pronounced degree; that is, the owners have competed in the market by speeding up the output and underbidding on the price. The result has been low prices for the time being, and a rapid exhaustion, with waste, of the natural resources. Presently, as the holdings have been drawn together into the ownership of a smaller and more manageable number of absentee owners, these owners have more and more consistently acted in collusion, and in time have drawn together into combinations which have taken on a corporate character, at least in effect, and so have ceased to compete among themselves. [5]

The result is not that competition ceases or declines when the business of a given line of natural supply so outgrows what is called the competitive stage and passes under the control of a collusive or corporate combination of absentee owners, but only that it takes a new turn, commonly with an increased vigor and persistence. Instead of competing against one another, to their own mutual defeat, the absentee owners now turn their divided competitive efforts against the consumers. It becomes a competition not within the business but between this business as a whole and the rest of the community. This stage of business maturity, which may be called the stage of vested interest, has progressively been reached in a very passable fashion by the generality of that absentee ownership that controls the necessary supply of raw materials used in the leading industries, - in what are sometimes called the "key industries."

 


 

Notes

[1] It is not easy in any given case - indeed it is at times impossible until the courts have spoken - to say whether it is an instance of praise-worthy salesmanship or a penitentiary offense. All that may turn on a point of legal verbiage, and it may also depend somewhat on the magnitude of the transaction and the business rating of the parties in interest; a large transaction is, on the whole, less likely to be found reprehensible.

[2] A classic illustration of the first point are the flint deposits of Denmark, which were of first-rate consequence as natural resources in the Stone Age; while the second point is conveyed by the case of the Negro man-power of the Southern States, which ceased to be assets as soon as the consent to its usufruct by absentee ownership was withdrawn.

[3] E.g., certain copper properties have varied greatly in their value as assets, with the continued discovery of further copper deposits, on the one hand, and with the increased requirements of electrical material, on the other hand. So also have nickel properties responded to changing circumstances of the same order. And both, but particularly nickel, considered as a means of free income for absentee owners, have been greatly helped out from time to time by a protective tariff designed to safeguard and augment the free income of vested interests of this class. It is the whole wisdom of a protective tariff that when the charges so imposed by the absentee owners are so protected by a protective duty the traffic can be made to bear a heavier charge. In further illustration of the general statement above, it may be recalled that the discovery of the Minnesota iron ores and the gradual perfecting of the steel smelting processes, incontinently cut down the value as assets of those Cuban ore bodies whose American absentee owners were to have been safeguarded in their free income by the Spanish-American War. But there are no end of illustrative instances, since the whole use and value of these natural resources, as well as variations in their value as assets, turn on the state of technological knowledge, with which the owners of them have nothing to do.

[4] Compare, e.g., the case of the Texas oil fields with that of the anthracite coal field.

[5] The salt business, e.g., shows a very fair instance of this gradual shifting from a competitive to a monopolistic footing.

 


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